Wednesday, July 29, 2009

More Optimism from Bloomberg

Dow Sends Buy Signal That’s Worked Since 1921: Chart of the Day . New reasons to keep driving this irrational rally keep sprouting. Excerpt:

"The Dow Jones Industrial Average is sending a buy signal that has foreshadowed
gains of 18 percent during the past nine decades. "

Here's the Chart, which only goes back historically to 1989, and is not attached in the above article:

Legg Mason Capital: S&P 500 to 1,350 by End of 2010

Bloomberg article:

The Standard & Poor’s 500 Index may reach 1,350 points by the end of 2010 or the first half of 2011 as the U.S. economy emerges from recession, Legg Mason Capital Management Inc. forecast in a statement.

Growth won’t be soft but will see a clear acceleration, followed by a period of stability, and “massive” quantities of liquidity may feed the market rebound, Legg Mason said.

The S&P 500 has surged 11 percent since July 10 after companies including Caterpillar Inc. and 3M Co. reported earnings that beat forecasts and gains in new and existing home sales added to signs the recession is easing. The rally left the S&P 500 trading at 16.25 times its companies’ profits at the end of last week, according to data compiled by Bloomberg.

“The improvement of fundamentals, in addition to the abundance of liquidity should limit market corrections to a range of -10 to -15 percent,” wrote Robert Hagstrom, a fund manager at Legg Mason.

Economic data must show improvements for the stock market to continue gains,
and that should happen in the second half of the year, Legg Mason wrote.

I guess they're counting on the same type of liquidity that inflated housing. Perhaps they should distinguish between Nominal S&P values and Real Values. In either case, bookmark this post and revisit it in 1.5 years.

Tuesday, July 28, 2009

Dow '29-'39 vs Nasdaq '99-'09

So now, let's take Dow 1937 - 1943 and compare that to Dow 2007 - Dow 2013, granted most of the latter data points don't exist. But if we look, so far, they match almost exactly.

From 1937, actually mid 1938 Dow topped out around 190 and then fell to 106. After that it rebounded to 145 a year later and hovered around that for almost 2 years, with 1 major dip which also bounced back toward 145. Eventually, however with a couple of years, the Dow went below the previous low of 106, down to 96.

Comparing to current situation: Dow topped around 14,000 and went down to 6,600. So in late the 1930's Dow experienced from 190 to 106, a 45% drop, and currently 14,000 to 6,600, a 53% drop -- close.

Back then Dow advanced from 106 to 145 is a 37% advance.
Recently from 6600 Dow moved to 9100, also a 37% advance.

Concidence? Perhaps. If not, within a year or two we'll be once again below 6600. With all these bailouts, stimuli, unfunded liabities, higher taxes, and universal health care, 6600 isn't too far away.

Monday, July 27, 2009

A Policy of Hypocrisy

As the horrifically flawed 1,000+ page health care bill is being rushed through congress, I invite you to listen to the audio clip below. No further introduction is needed.

Saturday, July 25, 2009

India Embraces Frugal Prudence

It appears that, at least for the time being, India has thwarted the West's bold commitments to action for the sake of action and a justification of detrimental means to idealistic, and questionable, ends -- the move to prevent 'global warming'.

India has taken the hardest line in the negotiations so far. Along with China, India refused at the meeting of the Group of Eight industrialised nations this month to sign up to a target of cutting global emissions by half by 2050. The countries were holding out to gain concessions from the west on financing.

The claims from Mr Ramesh that Western science was wrong on the question of melting Himalayan glaciers appeared to reinforce Delhi’s recalcitrant stance.

Mr Ramesh on Friday reiterated that India would not accept emissions caps to held curb global warming, Bloomberg reported. “The world has nothing to fear from India’s development ... An artificial cap is not desirable and not even necessary as we haven’t been responsible for emissions in the first place,” he said.

Earlier this week, he also challenged Hillary Clinton, US secretary of state, over her appeal to India to embrace a low-carbon future and not repeat the mistakes of the developed world in seeking fast industrialization.

Yes, of course, brilliant! Who would want to industrialize quickly? We should have more people impoverished for longer periods of time. I'm sure all impoverished people in the third world would love to hear that. I wonder how many gallons of jet fuel Hillary consumed in order to tell the poor in person that they should continue living in the slums longer for the sake of the environment.

Hillary Clinton is about as useful, and intelligent, as a stress ball. All joking aside -- asking a poor and developing nation to curb its growth outright by cutting energy use, or undertaking more expensive (cleaner) energy alternatives, is like telling a person who makes minimum wage to buy an $80,000 Lexus instead of a used $2,000 Chevy because of its cleaner running engine and safety features.

As detrimental as 'green' policies like cap & trade are to developed nations, burdening countries that cannot provide clean water to most of its citizens with expensive emission caps will likely lead to significantly higher and prolonged levels of poverty amongst its citizens, as well as decreased economic growth. Maybe Clinton can visit Darfur next, and tell them how they ought to install solar panels immediately.

Tuesday, July 21, 2009

Is a Successful Exit Strategy Likely?

Below is an excerpt from Ben Bernanke's testimony on March 3, 2009. Highlighted in red are my comments, which were not part of the original speach.

Unfortunately, the spending for financial stabilization, the increases in spending and reductions in taxes associated with the fiscal package, and the losses in revenues and increases in income-support payments associated with the weak economy will widen the federal budget deficit substantially this year. Taking into account these factors, the Administration recently submitted a proposed budget that projects the federal deficit to increase to about $1.8 trillion this fiscal year and to remain around $1 trillion in 2010 and 2011. As a consequence of this elevated level of borrowing, the ratio of federal debt held by the public to nominal GDP is likely to move up from about 40 percent before the onset of the financial crisis to more than 60 percent over the next several years--its highest level since the early 1950s, in the years following the massive debt buildup during World War II.

Of course, all else equal, this is a development that all of us would have preferred to avoid. But our economy and financial markets face extraordinary challenges, and a failure by policymakers to address these challenges in a timely way would likely be more costly in the end. We are better off moving aggressively today to solve our economic problems; the alternative could be a prolonged episode of economic stagnation that would not only contribute to further deterioration in the fiscal situation, but would also imply lower output, employment, and incomes for an extended period. (They would not be more costly in the long run, the current policy will -- read on).

With such large near-term deficits, it may seem too early to be contemplating the necessary return to fiscal sustainability. To the contrary, maintaining the confidence of the financial markets requires that we begin planning now for the restoration of fiscal balance. As the economy recovers and resources become more fully employed, we will need to withdraw the temporary components of the fiscal stimulus (It will be years before our economy can be fully employed). Spending on financial stabilization also must wind down; if all goes well, the disposition of assets acquired by the Treasury in the process of stabilization will be a source of added revenue for the Treasury in the out years (Bernanke is speculating on behalf of the tax payers?). Determining the pace of fiscal normalization will entail some difficult judgments. In particular, the Congress will need to weigh the costs of running large budget deficits for a time against the possibility of a premature removal of fiscal stimulus that could blunt the recovery. We at the Federal Reserve will face similar difficult judgment calls regarding monetary policy.

As I mentioned earlier, the President has recently submitted a budget, and it proposes an ambitious agenda, including new initiatives for energy, health care, education, and tax policy. These are all complex policy issues in which the specific design of each program is as important as the budgetary amount allocated to it. The Congress will have considerable work in evaluating how to proceed in each of these areas. (Bernanke is warranting Congress to determine what will ultimately benefit economic growth. In other words, Tweedle-Dee is giving Tweedle-Dum the reigns.)

As part of that evaluation, it will be critical to consider the formidable challenges and tradeoffs needed to simultaneously achieve an economic and financial recovery, fiscal responsibility, and program reforms that accomplish their desired goals effectively and efficiently. In particular, policymakers must remain prepared to take the actions necessary in the near term to restore stability to the financial system and to put the economy on a sustainable path to recovery. But the near-term imperative of achieving economic recovery and the longer-run desire to achieve programmatic objectives should not be allowed to hinder timely consideration of the steps needed to address fiscal imbalances. Without fiscal sustainability, in the longer term we will have neither financial stability nor healthy economic growth. (Bernanke conveniently concludes that economic success, or armageddon, will reside in the lap of congress. He is, of course, partly correct. The other part of that equation would be the Fed, whose negative effects on the economy he does not acknowledge. In either case, congress has never been able to be fiscally responsible, which is why Bernanke is covering his Fed A**).

Monday, July 20, 2009

Peter Schiff for Senate

Looks like Peter Schiff is seriously considering running for the senate seat in Connecticut against current senator Chris Dodd. I encourage you to view the enclosed videos in their entirety.

Friday, July 17, 2009

From Einstein to Feinstein

Even though Einstein did not work directly in the creation of the nuclear bomb, his breakthroughs in physics made the nuclear power a possibility. As a result of having contributed to the development of atomic weapons, Einstein grew to regret his contributions in that field.

Now it seems, a scientist by a similar name, may have found a cure for deadly radiation sickness. The implications are profound and go as far as enable doctors to treat cancer patients more effectively with higher level of radiation and a higher level of safety at the same time.

The experiment's results were dramatic: 70% of the monkeys that did not receive the cure died, while the ones that survived suffered from the various maladies associated with lethal nuclear radiation. However, the group that did receive the anti-radiation shot saw almost all monkeys survive, most of them without any side-effects. The tests showed that injecting the medication between 24 hours before the exposure to 72 hours following the exposure achieves similar results.

Another test on humans, who were given the drug without being exposed to radiation, showed that the medication does not have side-effects and is safe. Prof. Gudkov's company now needs to expand the safety tests, a process expected to be completed by mid-2010 via a shortened test track approved for bio-defense drugs. Should experiments continue at the current rate, the medication is estimated to be approved for use by the FDA within a year or two.

Senator Boxer: Ad Hominem > Logic

Thursday, July 16, 2009

Goldman Sacked!

Biden More Than He Can Chew

Here are a couple of gems from Biden.

On healthcare:
“We're doing things that we know are going to save you, your children and your grand children billions of dollars over the next years. But we're not able to prove it." emphasis added
On the economy:
“Folks look, AARP knows and the people with me here today know, the president knows, and I know, that the status quo is simply not acceptable. It’s totally unacceptable. And it’s completely unsustainable. Even if we wanted to keep it the way we have it now. It can’t do it financially.We’re going to go bankrupt as a nation. Now, people when I say that look at me and say, ‘What are you talking about, Joe? You’re telling me we have to go spend money to keep from going bankrupt?’ The answer is yes, that's what I’m telling you." Audio
This reminds me of a posting I made a few months ago about a quote from Timothy Geitner:
" wary of any organization that claims to guarantee success and demands upfront fees."
Not only should you be wary, based on the above quotes, you should be scared sh*tless.

Let us hope Biden won't be giving advice on sobriety to drunks -- I can only imagine: " 'What are you talking about, Joe? You're telling me to get sober I need to drink more alcohol?' The answer is yes, that's what I'm telling you."

I encourage you to read Mish's coverage, which offers 2 more historic examples of similar tomfoolery.

Audio: Ron Paul on the Fed

Monday, July 13, 2009

Housing 'Happiness'

I came across the following video at Zero Hedge, from the creator Nick Gogerty. Great video, and the backgrownd tune is great too -- "Happiness" by De Phazz.

Thursday, July 9, 2009

Protest Outside Standard & Poor's

Below is the details of the protest, in a form of a handout given to passerby's. Transcript below.

S&P is an agency which should hold zero credibility when it comes to ratings. Having said that, protesting against S&P for what the tenants consider bad business practices may, ultimately, be somewhat of a stretch, though the reasoning toward a refinement in credit rating considerations seem legitimate.

First, I must note that as long as the the owner (Vantage) abides by the leasing agreements and any other contractual obligations it has, then I see nothing wrong with them adjusting asking prices or changing terms of services from those of the prior owners. If those are unsatisfactory conditions and prices, then ultimately Vantage will suffer a monetary loss by losing money on their investment when its business practices drive away customers.

However, when it comes to credit ratings, if the above holds true, then such business practices would indeed provide conditions for increased risk for a highly leveraged company, and any impact toward risk for a company should be an indicator for S&P to factor that into their rating system -- if they don't already do so. Unfortunately, the problems with S&P rating system is far more flawed than this protest would have us believe.


What Standard and Poor's Should Know About Problems
with Vantage Building Portfolio Loans

Standard and Poor's has provided credit ratings for a number of commercial mortgage-backed securities (CMBS) that include large portfolio loans for New York City apartment buildings owned by Vantage Properties. These CMBS have been sold to investors, and include CSMC 2007 C 1. CSMC 2007 C2, CSMC 2007 C4. and CSMC 2006 CS.

Tenants who live in some Vantage Properties buildings have concerns about physical and financial distress in the buildings. The tenants believe that Standard and Poor's should know the following information:

  • Vantage Properties, and their equity partner AREA Real Estate Advisors, have been described in the press as a "predatory equity" developer who purchased buildings with outsized mortgages that could only be justified if low-rent-paying tenants were forced to move out and building services were cut back In fact, a judge recently ruled that actions alleged by tenants constitute illegal harassment, and that a lawsuit against Vantage may proceed in State Supreme Court (Jose Ricardo Aguatza, et al. v Vantage Properties LLC. et al. Index 9 105197108)
  • Information from the loan serv►cer for the CMBS suggests that the buildings were badly
    overleveraged when the financing was underwritten, and may now be in financial distress. In June. 2006, loan servicer reports indicated that two of the above mention four portfolio loans were on the servrcer's "default watchlhst". By December. 2008. all four of the above loans were on the servicer's default watchlist According to notes from the loan servicer, one of the primary reasons that these loans were marked as being potentially distressed is that the debt-servrce-coverage-ratios (DSCR) were low. In June. 2008. the average DSCR for the four Vantage Property bars was .7111. By December, 2008. the average DSCR had fallen to SO/ 1. That is, that only 50 cents was being produced by the properties for every dollar of debt owed.
  • Tenants have complained to the New York City Department of Housing Preservation and
    Development that Vantage is denying necessary services to tenants These complaints include
    the fact the on-site superintendent has been removed from puny of the buildings, which tenants behave has reduced the maintenance and repair of the buildings.

Tenants are calling on the Securities and Exchange Commission to issue rules for credit rating agencies such as Standard and Poor s to insure that all relevant information, such as the above, is taken into account when a rating Is issued (or a mortgage-backed security

For further information, contact
Teresa Pere, President - 718.926-9225; Meah. Vice President - 718.709.19&1 Lauren Spnnger, Secretary - 917 805-1905

Tuesday, July 7, 2009

It's Not Just That Global Warming Is Fake. What Matters Is Why This Fakery Is Being Promoted.

by Gary North
July 3, 2009

Global warming is based 100% on junk science. The most vocal promoters are not interested in the details of physical science. They are interested in two things: political control over the general public and the establishment of international socialism.

Junk Science vs. Real Science

For a detailed, footnoted, 12-page article, written by three scientists, two with Ph.D's from CalTech, click here.

This paper was sent to tens of thousands of natural scientists in the United States.
Over 31,000 scientists have put their reputations on the line and signed a politically incorrect petition opposing the 1997 Kyoto agreement or protocol. Here is a photocopy of a signed petition.

Here is a letter from a former president of the National Academy of Sciences. He asks recipients of the petition to sign it.

Back in the 1970's, the bugaboo was the coming ice age, as this Time Magazine article promoted. Not to be outdone, Newsweek got on board. The article warned: "Climatologists are pessimistic that political leaders will take any positive action to compensate for the climatic change, or even to allay its effects." Want more examples? Click here.

It, too, was based on junk science. It, too, had the same solution: government control over the economy. The goal never changes: government management over the economy. The justification has changed. If the voters won't accept control over their lives on the basis of one brand of junk science, maybe they will accept another. As they used to say in the Nixon Administration: "Let's run this up the flagpole and see if anyone salutes."

Socialism's Last Stand

The global warming movement is not about global warming. It is about the creation of an international political control arrangement by which bureaucrats who favor socialism can gain control over the international economy.

This strategy was stated boldly by economist Robert Heilbroner in 1990. Heilbroner, the multi-millionaire socialist and author of the best-selling history of economic thought, The Worldly Philosophers, wrote the manifesto for these bureaucrats. He did this in an article, "Reflections: After Communism," published by The New Yorker (Sept. 10, 1990).

In this article, he made an astounding admission. He said that Ludwig von Mises had been right in 1920 in his article, "Economic Calculation in the Socialist Commonwealth." Mises argued that without private ownership, central planners could not know what any resource is worth to consumers. With no capital market, the planners would be flying blind.

Heilbroner said that for 70 years, academic economists had either ignored this article or dismissed it without answering it. Then Heilbroner wrote these words: "Mises was right."
Heilbroner was one of these people. There is no reference to Mises in The Worldly Philosophers.

This admission was the preliminary section of Heilbroner's manifesto. He was cutting off all hope by socialists that there is a theoretically plausible response to Mises. The free market economy will always outproduce a socialist economy. Get used to it, he said.

Then, in the second section, he called on his socialist peers to get behind the ecology movement. Here, he said, is the best political means for promoting central planning, despite its inefficiency. In the name of ecology, he said, socialists can get a hearing from politicians and voters.

The article is not online. An abstract is. Here is the concluding thought of the abstract.

The direction in which things are headed is some version of capitalism, whatever
its title. In Eastern Europe, the new system is referred to as Not Socialism. Socialism may not continue as an important force now that Communism is finished. But another way of looking at socialism is as the society that must emerge if humanity is to cope with the ecological burden that economic growth is placing on the environment. From this perspective, the long vista after Communism leads through capitalism into a still unexplored world that roust [must?] be safely attained and settled before it can be named.
Heilbroner did not care that a worldwide government-run economic planning system would not be called called socialism. He just wanted to see the system set up.

Heilbroner's peers got the message. That was what Kyoto was all about.


If you like poverty, inefficiency, and bureaucratic controls over the economy, and therefore control over your choices, the "climate change" movement is ideal.

If you want to subsidize China and India, neither of which will enforce the rules laid down by unelected international bureaucrats, this movement is for you.

If you want to pay more for less energy, there is no better way than to pass the cap and tax bill which the House has passed. It will be sent to the U.S. Senate next week.

The rest of us should oppose it.

I hereby authorize anyone to reprint this article or post it on any website, just so long as the text is not changed.